USAID/Power Africa Announces more than $1,000,000 in Catalytic Grants to Expand Access to Finance for Off-Grid Solar Companies in Sub-Saharan Africa
Power Africa, through the United States Agency for International Development (USAID), announces five new grants totaling $1,014,520 to support financial institutions to design and administer innovative investment products aimed at strengthening resilience and growth of off-grid solar companies in sub-Saharan Africa.
Over the past decade, the off-grid solar energy sector has expanded into a $1.75 billion annual market serving 420 million users.[1] Off-grid energy operations are working capital intensive and traditional debt and equity transactions alone cannot sustain the rapid growth of the sector. Lack of adequate equity capital puts increasing pressure on off-grid companies and investors to find scalable financing solutions. Recognizing the need for more innovative financing products, Power Africa is issuing grants to support the evolving financing needs of off-grid companies and accelerate investment into the off-grid sector.
Grantees identified to develop investment and financing products, structures, and transactions with Power Africa funding are First Growth Ventures, Gaia Impact Fund, Helios Investment Partners, Nithio Holdings Inc., and SunFunder. Awardees will implement initiatives to fast-track the deployment of tailored capital into off-grid solar companies in Cameroon, Cote d’Ivoire, Democratic Republic of Congo, Ethiopia, Ghana, Kenya, Liberia, Niger, Nigeria, Rwanda, Senegal, Tanzania, and Uganda.
“While the financing needs of off-grid companies are evolving toward larger and often more complex structures and facilities, off-grid investment capital remains limited” said David Stonehill, the Lead for Power Africa’s Beyond the Grid Initiative. “The grants announced today aim to develop innovative and scalable financing products that will stimulate investment and support the positive growth of off-grid companies in sub-Saharan Africa.”
With its grant, First Growth Ventures will identify and invest in promising companies providing generic software as a service (SaaS) solutions to serve multiple solar home system (SHS) distributors. Such solutions will allow SHS distributors to:
· Focus resources on core business activities rather than investing in custom software development and maintenance;
· Improve operations by better managing fraud, tampering, and defaults;
· Collect reliable customer and usage data to inform business operations;
· Meet the requirements of private debt providers by leveraging data for asset-backed financing.
The First Growth Ventures grant will also be used to support the structuring of debt vehicles providing local currency loans to SHS distributors.
Gaia Impact Fund will develop an investment readiness product targeting local African companies. The product will focus on optimizing companies’ capital structures to attract specialized energy and technology investors. To measure the impact of the approach on portfolio growth, Gaia intends to invest in a productive use of electricity company as well as a mini-grid company and anticipates that the investment readiness package and early stage capital investments will catalyze equity and attract additional investor interest.
Helios Investment Partners will apply its grant award to set up a blended financing structure and provide legal support to allow one of its portfolio companies, Zola Electric, to attract capital for a COVID-19 response program. Zola’s response program includes provision of reliable and clean energy to more than 2,000 hospitals in sub-Saharan Africa and more than 22,500 off-grid connections for customers in need of energy during the pandemic.
Nithio Holdings Inc., a women-led business, mobilizes and deploys debt capital from commercial and concessional investors to the off-grid energy sector. To support scale-up of its lending operations and credit risk analysis platform, the grant will help Nithio cover legal fees related to setting up a receivables warehousing facility and analyze receivables portfolios of select off-grid solar companies.
SunFunder intends to apply the Power Africa grant funding to support transaction costs associated with the design, structuring, and financing of up to four new off-grid structured finance products using off-balance sheet special purpose vehicle structures and borrowing base facilities. The related asset finance transactions with SHS and productive use of electricity companies are projected to result in 370,000 new off-grid connections and over 55,000 productive use solar energy systems deployed.
The main objective of these grants is to increase access to energy in sub-Saharan Africa through accelerating the deployment of tailored investment capital into off-grid companies.
The competition was administered by the USAID-funded Power Africa Off-grid Project in support of Power Africa’s Beyond the Grid initiative, which contributes to the goal of facilitating 60 million new electricity connections in sub-Saharan Africa by 2030.
[1] Off-grid Solar Market Trends Report 2020. World Bank Group. https://www.lightingglobal.org/resource/2020markettrendsreport/
